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The week in renminbi: Trade talks ongoing, China rolls out 5G, Caixin PMI rises while official PMI slumps

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By Rebecca Feng
04 Nov 2019

In this round-up, the US and China held another round of phone calls on trade last Friday, China officially launched the 5G mobile network and the rise in Caixin Purchasing Managers’ Index (PMI) was at odds with the slump in the official PMI.

China’s vice premier Liu He and US trade representative Robert Lighthizer and the secretary of the treasury Steven Mnuchin held another round of phone calls last Friday evening, according to a Saturday notice issued by the Chinese Ministry of Commerce.

“The two sides had sincere and constructive discussions on solving issues of core concerns,” the statement read. “Both sides reached an agreement in principle and discussed next steps for negotiations.”

In addition, US president Donald Trump said on Friday evening that he and the Chinese president Xi Jinping could potentially sign the phase one trade deal in Iowa. 

“We’re looking at a different couple of locations,” he told reporters at the White House. “It could even be in Iowa. We’re discussing locations, but I like to get deals done first.”

Trump added he would prefer to sign the deal in the US and said that Xi would too. 

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China has launched the commercial 5G mobile services nationwide, Chen Zhaoxiong, vice-minister of the Ministry of Industry and Information Technology, said last Thursday in Beijing. Some 130,000 5G cell towers will be set up by the end of the year, he said. 

China Mobile, China Unicom and China Telecom, the country’s three major wireless carrier providers, have already announced their monthly 5G mobile plans. The monthly plan costs as low as Rmb128 ($xx) Caixin reported.

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While the manufacturing PMI data released by the National Bureau of Statistics last Thursday showed a slump in the index, the Caixin manufacturing PMI, which represents small and medium-sized enterprises, rose by 0.3 percentage point to 51.7% in October from September.

“Compared with the official manufacturing PMIs, the uptick in the Caixin manufacturing PMI was consistent with the rise in the official manufacturing PMI for medium-sized enterprises, but belied the fall in that for small enterprises,” Ting Lu, chief China economist at Nomura, wrote in a Friday note. 

The rise was mainly led by a surge in new orders and output sub-indices. The pair rose to 53.6% and 53.0% in October from 51.9% and 52.5% in September respectively. However, the employment sub-index fell by 1.7 percentage point from 49.9% to 48.2%. 

“Despite the rise in the Caixin manufacturing PMI, we believe growth headwinds, particularly from exports and the property sector, remain quite strong and maintain our view that the worst is yet to come,” Lu added. 

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Chinese president Xi is due to deliver a keynote speech at the opening ceremony of the 2nd China International Import Expo and the Hongqiao International Economic Forum in Shanghai on Tuesday. 

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Henan Yichuan Rural Commercial Bank, a small bank in the Henan province, saw long lines of individual depositors withdrawing money last week, local media reported. 

The panic was due to rumours that the bank’s chairman and the largest shareholder, Kang Fengli, has been put under investigation by the local discipline inspectors for alleged corruption. 

Following the incident, local governments and branches of the banking regulator issued statements ensuring the public that the bank has enough liquidity and is operating normally. However, they also confirmed that the chairman is under investigation. 

In May, the People’s Bank of China (PBoC) took control of Baoshang Bank, a city-level commercial bank in Inner Mongolia. The incident was China’s first bank bailout in nearly two decades. After that, the regulators have also indirectly put Bank of Jinzhou and Hengfeng Bank on lifelines by bringing in state-owned banks and asset management firms as shareholders. 

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Huawei Technologies Co is returning to the onshore bond market for another Rmb3bn three year trade on Tuesday. Its first onshore bond issuance, a Rmb3bn three year deal, was sold just two weeks ago. That trade achieved tighter pricing than some government-owned issuers. 

China Construction Bank will be the sole lead and underwriter for the upcoming deal. Industrial and Commercial Bank of China was the sole lead and underwriter for Huawei’s debut onshore bond. 


By Rebecca Feng
04 Nov 2019